The U.S. Court of Appeals for the Fifth Circuit has reversed the decision of a lower court and held that an insurer must defend a roofing manufacturer in litigation in which the company's roof membrane system allegedly caused additional damage to a Bronx high school. The case is Siplast, Inc. v. Emps Mut. Cas. Co., No. 20-11076, 2022 U.S. App. LEXIS 795 (5th Cir. Jan. 11, 2022).
The duty-to-defend case stems from an underlying lawsuit filed by the Archdiocese of New York and other plaintiffs including Siplast Inc, a roof manufacturer, which had sold a roof membrane system to a Bronx high school in 2012. According to the ruling, Siplast provided a 20-year guarantee for the work.
In November 2016, ceiling tiles throughout the high school suffered water damage after a rainstorm. A Siplast contractor attempted to repair any damage and prevent leaks, but the school continued to suffer from water damage. After continued communication, Siplast admitted there were problems with the roof, and that its earlier repair attempts had been temporary. Siplast "would not honor the Siplast Guarantee with respect to any permanent improvements of the roof." A consultant said remediation and roof replacement would cost around $5 million. The plaintiffs then filed suit against Siplast.
Employers Mutual Casualty refused to defend Siplast in the litigation, and Siplast filed suit against the insurer in the U.S. District Court in Dallas, charging breach of contract. The district court granted Employers Mutual's motion for summary judgment, holding that a "Your Product/Your Work Exclusion" in its commercial general liability coverage applied.
A three-judge appeals court panel overturned the ruling, finding that the claims "that are at issue, in this case, can largely be reduced to a single question: does the Underlying Complaint contain allegations to damage to property other than Siplast's roof membrane as part of the cause of action against Siplast? Liberally construed, it does."
The ruling overturned the lower court and remanded the case for further proceedings, and noted that "[t]he factual allegations raised by the complaint repeatedly point to damage to property other than Siplast's roof membrane system."
The insurer did have a duty to defend under the commercial general liability policies which it issued because the complaint in the underlying lawsuit alleged that the insured negligently provided a defective roof membrane which caused damage to the roof and to the school.
Editor's Note: The opinion said that the archdiocese sought damages that could have been covered by the insurance policies, the failure of the roof was an occurrence, and the contractual liability exclusion in the insurance policies did not apply to the insured's claim.